Plitt v. Kaufman

• Decision Date: 11 June 1947
• Docket Number: 143.
• Parties: PLITT v. KAUFMAN et ux.
• Court: Maryland Court of Appeals

53 A.2d 673

188 Md. 606

PLITT v. KAUFMAN et ux.

No. 143.

Court of Appeals of Maryland

June 11, 1947

Appeal from Circuit Court, Baltimore County; John B. Gontrum, Judge.

Suit by Harry J. Kaufman and Elizabeth M. Kaufman, his wife, against Clarence M. Plitt for an accounting and to enjoin sale of certain property under execution. From an order overruling defendant's demurrer to the bill, defendant appeals.

Reversed and remanded with directions.

T Lyde Mason, Jr., of Baltimore (J. Dallas Kirwan, of Baltimore, on the brief), for appellant.

Joseph O. Kaiser, of Baltimore (R. Palmer Ingram, of Baltimore, on the brief), for appellees.

Before MARBURY, C.J., and DELAPLAINE, COLLINS, GRASON, HENDERSON and MARKELL, JJ.

DELAPLAINE Judge.

This suit was brought by Harry J. Kaufman and Elizabeth M Kaufman, his wife, of Baltimore County, against Clarence M. Plitt, of Baltimore City, to obtain an injunction and accounting. They allege in their bill of complaint that from time to time from 1932 to 1935, while defendant and his brother, E. Wilbur Plitt, were conducting a wholesale meat business, defendant advanced sums of money to complainants' son, Roland Kaufman, a retail meat dealer, when he was unable to make prompt payments for purchases of meat. They allege that they signed for their son eight promissory notes in the total amount of $11,750, but that $2,750 of this amount was for interest and carrying charges; and that in May, 1935, the son gave four checks totalling $650, for which defendant advanced $520, and the father gave a check for $500, for which defendant advanced $450. They then allege that in 1936 defendant represented that the total amount due on the notes and checks was $6,893.22, and warned the father that he would institute criminal prosecution against the son for obtaining goods under false pretenses, a charge he knew to be false, unless both parents should sign a confessed judgment note; and that on February 1, 1936, induced by defendant's threat, they gave him a note for $7,500. They further allege that on March 12, 1937, defendant obtained on the note in the Superior Court of Baltimore City a judgment by confession against complainants for the sum of $7,552.50 and attorney's commission of $750 for collection; and on July 3, 1946, he caused a writ of fieri facias to be issued on the judgment, whereupon the sheriff levied on their home at 1005 Leeds Avenue, which they own as tenants by the entireties, and advertised it for public sale on July 30. They charge that the judgment includes usurious interest amounting to $3,700, and that the amount actually due with legal interest (after deducting $500 paid for two waivers of the judgment lien, the first given in July, 1937, the other in January, 1939) does not exceed $7,500; and accordingly they tender a certified check for $7,500 payable to the order of the clerk. They pray for an injunction to prevent sale of the property under execution, and an accounting to determine the amount legally due on the judgment. Defendant demurred to the bill, and he is now appealing from an order overruling his demurrer.

From earliest times in history the taking of excessive interest for the loan of money has been regarded with abhorrence. In medieval England, the people, especially the English Church, held the opinion that the payment of any interest for the loan of money was corrupt and sinful. Under laws promulgated in the 10th and 11th centuries, when a man was found to be a usurer, his chattels were forfeited to the Crown and his lands escheated to the lord of the fee. Gray v. Bennett, 3 Metc., Mass., 522, 527; Dunham v. Gould, 16 Johns., N.Y., 367, 8 Am.Dec. 323. In 1545 Parliament adopted the Usury Act, Statute of 37 Henry VIII, ch. 9, providing that any contract for the loan of money at a rate of interest higher than 10 per cent should be wholly void. Likewise in Colonial America, the usury statutes, modeled after a later English Act, Statute of 12 Anne, ch. 16, made all usurious contracts void. In Maryland it was held by the Court of Appeals prior to 1845, in accordance with the English decisions, that a borrower, having a moral obligation to return the amount borrowed and the legal interest, could not obtain relief as a plaintiff either at law or in equity, except upon the condition that he would pay the amount due after deducting the illegal interest, but when in court as a defendant he could relieve himself from the entire contract because the statute had declared it utterly void. In 1845 the Legislature enacted that any person guilty of usury shall forfeit all the excess above the real sum actually loaned and the legal interest on such sum, which forfeiture shall enure to the benefit of any defendant who shall plead usury and prove the same. Laws of 1845, ch. 352, Code 1939, art. 49, § 4. The effect of the Act was to compel the borrower who, as defendant, sought to extricate himself from a usurious contract to do exactly what he was before obliged to do when he asked to be protected against it in the position of a plaintiff.

This Court has held that no device or subterfuge of the lender will be permitted to shield him in taking more than the legal interest on a loan. In whatever part of the transaction usury may lurk, or in whatever form it may take, or under whatever guise the lender may attempt to evade the law, the court will seek to ascertain what the contract actually was between the parties and give the debtor relief. Andrews v. Poe, 30 Md. 485; Brenner v. Plitt, 182 Md. 348, 34 A.2d 853. Where a creditor exacts of a debtor, as a condition of the loan, a sum in addition to the lawful interest, whether designated as a bonus, commission, or carrying charge, or by any other name, the transaction is tainted with usury, except where the sum so exacted, when added to the stipulated interest, does not exceed interest at the maximum lawful rate on the principal sum of the loan. Walter v. Foutz, 52 Md. 147; Bowdoin v. Hammond, 79 Md. 173, 28 A. 769; Glass v. Third National Building & Loan Ass'n of Baltimore City, 156 Md. 26, 143 A. 587. While no cause of action is maintainable in this State in any case where the evidence of indebtedness has been settled for by the obligor, the Legislature has expressly provided that usury shall be a cause of action in all cases where the settlement is secured by or connected with a renewal in whole or in part of the original indebtedness. Laws of 1912, ch. 835, Code 1939, art. 49, § 6. So, where an obligation has become affected with usury, the taint of illegality follows the indebtedness as long as it may be traced, and any renewal of a usurious obligation including usurious interest remaining unpaid is itself usurious, even though in itself it bears no more than legal interest. Bridge v. Hubbard, 15 Mass. 96, 8 Am.Dec. 86.

At common law a person who has paid excessive interest may recover it in an action for money had and received. The law is established in this State that a borrower in a usurious contract is not in pari delicto with the lender, and hence if the borrower has paid money upon a usurious contract, he may recover at law or in equity the excess paid beyond the principal and lawful interest, but no more. West v. Beanes, 3 Har. & J., Md., 568; Grinder v. Nelson, 9 Gill, Md., 299, 52 Am.Dec. 694; Scott v. Leary, 34 Md. 389; Horner v. Nitsch, 103 Md. 498, 63 A. 1052. Usury does not of itself constitute a ground of equitable jurisdiction. Very often the form of a usurious obligation is such that an action at law is adequate to prevent its enforcement. But where a usurious instrument is a cloud upon the title to land, or where an accounting is necessary to prove the usury, or where there are other circumstances that prevent an adequate remedy at law, equity may interpose its aid to enjoin the enforcement of the contract. Minturn v. Farmers' Loan & Trust Co., 3 N.Y. 498; Allerton v.

Belden, 49 N.Y. 373, 378. Thus a court of equity will enjoin the sale of land under execution on a judgment entered in a court of law by confession upon a promissor, note given for a usurious consideration, upon payment of the real amount of the debt with legal interest.

Defendant contends that complainants cannot invoke the aid of equity because the usurious dealings were not with complainants, but with their son. It has been held that a third person who has assumed for a valuable consideration to pay a usurious debt cannot avail...